China Expands Its Legal Response to Unilateral Foreign Sanctions

Chinese authorities continue to broaden China’s counter-sanctions framework through administrative countermeasures, trade and regulatory controls, national-security reviews and judicial remedies. Recent developments suggest that the potential effect of these measures may extend beyond entities formally designated under the Anti-Foreign Sanctions Law of the People’s Republic of China (AFSL) to a broader range of cross-border transactions, supply chains, technologies and contractual relationships.

I. Recent Administrative and Regulatory Developments

On August 5, 2026, China’s Ministry of Commerce (MOFCOM), together with other Chinese authorities, announced a series of countermeasures in response to recent U.S. restrictive measures. The U.S. actions cited by the authorities include increased tariffs, Federal Communications Commission (FCC) restrictions that affect the import of Chinese technology and robotics products and the designation of 43 Chinese companies under the U.S. forced labor regime.

Countermeasures Against Designated U.S. Entities

MOFCOM placed seven U.S. entities on China’s Countermeasure List. Six of these —Applied DNA Sciences, Stratum Reservoir, LLC, Altana Technologies, Responsible Business Alliance (RBA), Verité and Human Rights in China—were designated for allegedly assisting and supporting U.S. measures relating to Xinjiang.¹ Compliance Testing LLC (CT) was designated separately for allegedly assisting and supporting the FCC’s restrictive measures against China.² The countermeasures took effect on August 5, 2026, and prohibit organizations and individuals within China from engaging in transactions, cooperations or other activities with the designated entities.

Enhanced Export Controls on Drones and Related Dual-Use Items

MOFCOM also tightened export controls on drones, key components and technologies covered by China’s Dual-Use Item Export Control List when destined for the United States. In accordance with the announcement issued by MOFCOM, exports will be subject to stricter case-by-case reviews and will not benefit from otherwise applicable licensing facilitation measures.³ As a result, exporters of controlled items to the United States may expect heightened scrutiny during the licensing process and could be required to provide additional supporting documentation including contracts, technical specifications, customer information and end-use statements. Companies that rely on China-sourced components for drone R&D and manufacturing may face increased compliance and logistics costs, longer licensing timelines and greater uncertainty in supply-chain planning.

Suspension of U.S.-Based CCC Factory Follow-Up Inspections

The National Certification and Accreditation Administration has suspended the authorization of U.S.-based certification bodies to conduct follow-up factory inspections for products certified under China’s Compulsory Certification (CCC) system.⁴ The measure does not directly prohibit the import of U.S. products into China or invalidate existing CCC certificates. Instead, it may shift responsibility for post-certification factory surveillance to Chinese-designated entities or non-U.S. certification bodies. This may increase audit costs and lengthen certification timelines for U.S.-based manufacturers exporting products to China.

National and Cybersecurity Security Investigation into Palo Alto Networks and Imported Printing and Copying Equipment

MOFCOM has also initiated its first foreign-trade national-security investigation under the Foreign Trade Law for imported printing and copying office equipment that contains foreign system software. The investigation will examine the potential impact of these products, technologies and services on China’s national-security interests, as well as the extent to which domestic industries depend on those imports.⁵

On August 6, 2026, the Cyberspace Administration of China initiated a formal cybersecurity review of Palo Alto Networks products under China’s Cybersecurity Law and national-security regulations, citing potential risks to critical information infrastructure and national security.⁶ This follows reports in January 2026 that Chinese authorities had instructed companies in China to reduce their reliance on certain cybersecurity products supplied by U.S. and Israeli vendors on national-security grounds, including Palo Alto Networks, VMware, Fortinet and Check Point Software.

The outcome of these reviews and investigations may inform further regulatory action. Therefore, companies operating in China may consider whether to review their China-based IT infrastructure, particularly their use of cybersecurity products, data-processing activities and cloud services supplied by the affected vendors. They may also wish to assess their reliance on foreign technologies, the availability of alternative sourcing arrangements and their readiness to respond to potential regulatory inquiries.

II. Emerging Judicial Remedies Under China’s AFSL

Recent developments are not limited to administrative measures. Chinese courts are also playing a more visible role in addressing the commercial consequence of foreign restrictive measures.

In a Shanghai Maritime Court case, a Singaporean shipping company refused to issue bills of lading or deliver goods to a Hong Kong-based Chinese trader and unilaterally repatriated the cargo on the grounds that the Chinese party was subject to unilateral foreign sanctions. According to publicly available court documents, the court held that the Singaporean company’s assistance in implementing those foreign restrictive measures violated the AFSL and constituted a fundamental breach of contract. The court ordered the Singaporean company to compensate the Chinese party in full for the resulting economic losses.⁷

As China strengthens its anti-sanctions enforcement framework, global financial institutions, including JPMorgan and Citibank, have also come under increased regulatory and judicial scrutiny. According to publicly available court documents, in July 2023, Haiyue Energy Group (Haiyue), a Chinese state-controlled company, remitted approximately USD 40 million through two U.S. correspondent banks—JPMorgan and Citibank—to China Oil and Petroleum (COPC), a Hong Kong entity, as payment for oil purchases.

In May 2024, the two banks notified Haiyue that the funds had been frozen because COPC had been designated a Specially Designated National (SDN) based on its alleged affiliation with sanctioned parties. In February and March 2026, Haiyue commenced separate civil proceedings against the PRC subsidiaries of the two banks in the Beijing Financial Court and the Shanghai Financial Court, respectively, seeking approximately USD 40 million in damages plus interest.

Haiyue alleges that the banks’ implementation of sanctions administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) constitutes assistance in applying foreign restrictive measures against a Chinese enterprise, relying on principles reflected in the AFSL. Although the proceedings remain pending, MOFCOM’s issuance of its ‘three prohibitions blocking order’ may increase the legal exposure of JPMorgan’s and Citibank’s China operations.

These cases indicate that Chinese enterprises may seek relief under the AFSL when a foreign counterparty withholds contractual performance in reliance on foreign restrictive measures.

III. Countermeasures on RBA and CT and Industry Implications

The Chinese countermeasures against RBA and CT potentially have significant industry implications.

MOFCOM imposed countermeasures against RBA based on allegations that RBA and other entities had assisted or supported certain foreign measures against Chinese companies.

RBA is a U.S.-based industry organization that promotes responsible business practices in global supply chains. It operates various assessment programs under which RBA-approved independent audit firms assess factories for compliance with RBA standards covering labor, health and safety, environmental matters, ethics and management systems. RBA processes have become embedded in the supplier-management and compliance systems of many U.S. and multinational companies.

MOFCOM's countermeasures prohibit organizations and individuals within China—including the subsidiaries of multinational companies and their suppliers and business partners in China—from engaging in transactions, cooperation and other activities with RBA. Given the widespread use of RBA standards and assessment programs in global supply chains, the countermeasures are likely to have significant practical implications and may cause business disruptions for multinational companies and their Chinese suppliers.

CT is an Arizona-based testing company. MOFCOM imposed countermeasures against CT based on allegations that it had assisted or supported recent FCC measures on Chinese companies. The same prohibition applies - organizations and individuals within China may not engage in transactions, cooperation and other activities with CT. The countermeasures against CT may also have important practical implications, although their impact is likely to be somewhat narrower than those involving RBA.

The MOFCOM countermeasures mean that the subsidiaries of multinational companies and their suppliers or business partners in China may not directly enter into contracts with RBA or CT, participate in membership or assessment activities involving the sanctioned entities, subscribe for their services, make payments to them, participate in training, or engage in other activities requiring direct transactions or cooperation with RBA or CT.

These measures may make it more difficult for multinational companies operating in China and Chinese manufacturers to satisfy certain testing, assessment and certification requirements for U.S. or other international market access. Affected companies may need to suspend or terminate existing engagements with RBA or CT, identify alternative qualified providers, transfer product samples and technical documentation, repeat certain testing or assessment procedures, resolve outstanding fees and address incomplete testing or assessment reports. The resulting disruption may increase costs, extend testing and certification timelines, and delay product launches or shipments.

The combination of U.S. restrictions affecting certain China-based testing laboratories and Chinese countermeasures targeting U.S. testing, assessment and certification providers may narrow the available pool of qualified service providers and create uncertainty around the use of third-party laboratories, audit firms, subcontractors and other intermediaries. Companies may therefore wish to review their existing compliance and certification arrangements and develop alternative solutions that can satisfy the applicable U.S. or international requirements without requiring dealings with sanctioned entities.

IV. Conclusion: Key Considerations for MNCs

These recent developments highlight the increasingly comprehensive and operational nature of China’s anti-sanctions framework. For MNCs, risks are no longer confined to formal countermeasures directed at designated parties. They may also arise through export licensing, product certification, technology and cybersecurity reviews, national-security investigations, data and regulatory cooperation requirements and private contractual disputes. Companies with U.S.–China operations, customers, counterparties or supply-chain exposure may need to assess not only whether a U.S. restriction applies, but also whether compliance with that restriction could create exposure under the AFSL, PRC blocking measures, export-control rules or other Chinese national-security requirements.

The challenges associated with the countermeasures on RBA and CT do not appear to outweigh the underlying policy objectives. MNCs may want to bear in mind that testing, certification, payment, logistics, cloud, cybersecurity and other technical service providers may no longer be viewed as legally neutral intermediaries. Their involvement may present an area in which U.S. and PRC legal requirements overlap or may be difficult to reconcile.

This is occurring against a backdrop of continued, but limited, U.S.–China engagement on trade and economic issues. Recent bilateral discussions and Board of Trade-related developments may support targeted dialogue and practical arrangements in non-sensitive areas. They do not, however, resolve the more fundamental disagreements over tariffs, export controls, investment screening, technology restrictions, supply-chain security, sanctions and the treatment of China-linked entities.  Companies may not assume that progress in trade discussions will translate into reduced enforcement risks or a relaxation of competing compliance expectations.

MNCs may wish to take a more integrated approach to U.S.–China compliance. This could include sanctions and counterparty screenings, the consideration of potential conflicts before withholding performance or restricting services, contingency planning for key providers and a review of China-related technology, data and supply-chain dependencies. Contractual arrangements should also be reviewed to ensure they appropriately address sanctions, export controls, regulatory changes and dispute resolution. More generally, legal compliance, operational planning and geopolitical considerations are increasingly interconnected and may be most effectively assessed together.

1. https://www.mofcom.gov.cn/zwgk/zcfb/art/2026/art_bd62c275eb144ba7bc6a50716ab823b6.html

2. https://www.mofcom.gov.cn/zwgk/zcfb/art/2026/art_5536d924b28442f3ad90db8d764bab0d.html

3. https://www.mofcom.gov.cn/zwgk/zcfb/art/2026/art_74835ca289b5463f9c36cb983b689dba.html

4. https://www.cnca.gov.cn/xwjj/scjgyw/art/2026/art_ce6dec0a49ea4f3eb1b14862f0b32e01.html

5. https://www.mofcom.gov.cn/zwgk/zcfb/art/2026/art_0e46c09f491a4881bae53c168c365361.html

6. https://www.cac.gov.cn/2026-08/06/c_1787764332950791.htm

7.https://shhsfy.gov.cn/hsfyytwx/hsfyytwx/spdy1358/jpal1435/2026/06/26/09b080ba9e354c49019f1768092007f5.html?tm=1783072220774

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